Europe, Syria Drag on Global Stocks 09/23 17:18
Grim economic news from Europe and airstrikes in Syria rattled global stocks
NEW YORK (AP) -- Grim economic news from Europe and airstrikes in Syria
rattled global stocks Tuesday.
Most of the damage was felt in European markets, which fell sharply after a
closely watched gauge of business activity for the region fell to a nine-month
The disappointing news about Europe's economy also weighed down Wall Street.
The Dow Jones industrial average opened lower and finished the day with its
second triple-digit loss in a row.
Investors have been dealing with meager economic growth in Europe for
months. The eurozone economy has been flat or barely growing since April,
hobbled by the lingering effects of a debt crisis, uncertainty over a conflict
in Ukraine and a lack of confidence among European consumers, businesses and
"It has a very feeble recovery going on that is vulnerable to even the
slightest external shock," said Jacob Kirkegaard, senior fellow at the Peterson
Institute for International Economics.
The European Central Bank has announced a series of measures to jolt the
economy, cutting interest and pumping money into the financial system by buying
bonds backed by assets such as auto and credit-card loans. But it has yet to go
as far as the U.S. Federal Reserve did, buying government bonds in an effort to
push long-term interest rates lower.
Carl Weinberg, chief economist at High Frequency Economics, is not
optimistic: "Recovery will take years."
European market indexes sank after the economic news. Germany's DAX fell 1.6
percent, France's CAC 40 fell 1.9 percent and the U.K.'s FTSE 100 lost 1
In U.S., the Dow slid 116.81 points, or 0.7 percent, to 17,055.87. The S&P
500 index lost 11.52 points, or 0.6 percent, to 1,982.77 and the Nasdaq
composite fell 19 points, or 0.4 percent, to 4,508.69.
The Dow's triple-digit fall on Tuesday follows a 107-point stumble from the
day before. The blue-chip index hasn't posted two losses of 100 or more points
Still, the outlook in the U.S. is far more positive than Europe. The economy
has been gaining strength after getting off to a slow start this year. Growth
reached a 4.2 percent annual pace from April through June. Unemployment has
dropped to 6.1 percent in August from 7.2 percent a year earlier. Employers
have been adding 215,000 jobs a month this year, up from 194,000 a month in
2013. Consumers are more confident and willing to take on debt.
But individual countries' economies cannot stand on their own in today's
global economy. If Europe and Asian economies were to lose more traction, it
could spill over into the U.S., traders say. Companies in the Standard & Poor's
500 index, for example, generate nearly half their sales abroad.
"When it comes right down to it, U.S. companies do business globally," said
Quincy Krosby, a market strategist with Prudential Financial. "Unless global
demand can keep up, it's going to start hurting these companies."
Along with the bad economic news, investors had geopolitical concerns to
worry about Tuesday.
The U.S. and five Arab nations attacked the Islamic State group's
headquarters in eastern Syria in nighttime raids Tuesday. U.S. aircraft as well
as Tomahawk cruise missiles launched from Navy ships in the Red Sea and the
northern Persian Gulf were used.
"The escalation of the conflict will of course raise questions over the risk
appetite of many within the markets," said Joshua Mahoney, research analyst at
Investors moved money into U.S Treasury bonds and gold, which are considered
havens during times of trouble. The yield on the 10-year U.S. Treasury note
fell to 2.53 percent from 2.57 percent. The price of gold rose $4.10, or 0.3
percent, to $1,222 an ounce.
"Bonds and gold are responding to those geopolitical concerns," Krosby said.
In other metals trading, silver edged up half a penny to $17.78 an ounce.
Copper fell less than a penny to $3.04 a pound.
U.S. health care stocks were among the hardest hit after the Obama
Administration announced rules that would go after companies trying to do
so-called corporate inversion deals. Such deals happen when a company merges
with an overseas competitor to legally move its headquarters out of the U.S. to
avoid paying high corporate tax rates. Health care companies have been among
the most active in striking such deals.
Shares fell for Medtronic and AbbVie, which have considered inversion deals.
Medtronic lost $1.90, or 3 percent, to $64.08 and AbbVie fell $1.15, or 2
percent, to $57.56. AstraZeneca, which was approached by Pfizer earlier this
year to do an inversion deal, fell $3.54, or 5 percent, to $71.13.
The euro was flat at $1.286 while the dollar rose 0.1 percent to 108.86 yen.
In oil markets, U.S. crude oil rose 69 cents to close at $91.56 a barrel in
New York. Brent crude, a benchmark for international oils used by many U.S.
refineries, fell 12 cents to close at $96.85 on the ICE Futures exchange in
London, reaching its lowest level since June of 2012.
In Asia, the decline in stocks was more modest. Hong Kong's Hang Seng shed
0.3 percent and Seoul's Kospi fell 0.6 percent. The Shanghai Composite Index
gained a 0.2 percent.